the market value of all final goods and services produced within a country in a given period of time

Deflation means that:

prices in the aggregate are falling, although some particular prices may be rising

The inflation rate is the

percentage change in the price level from one period to another

GDP does not reflect

the sale of intermediate goods

The consumer price index was 181.1 in 2002 and184.0 in 2003. Therefore, the rate of inflation in 2003 was about:

1.6

When the consumer price index rises, the typical family

has to spend more dollars to maintain the same standard of living

The federal funds rate is the interest rate that

banks charge one another for loans

If the price level increased from 120 to 129, then what was theinflation rate?

7.5 percent

The Bureau of Labor Statistics defines the unemployment rate as thepercentage of

the labor force that is unemployed

Graphically, demand-pull inflation is shown as a:

rightward shift of the AD curve

Assume that Richard, a factory worker at a steel mill, quits his job because he hears that other steel mills will pay him more money for the same amount of work. This week Richard is considered as:

frictionally unemployed

Dr. Homer Simpson, a typewriter technician, is laid off becausepersonal computers are a new technology that is now available to the masses. Thatyear, Professor Simpson would be officially counted as

structurally unemployed

Which of the following is true about the U.S. labor force participation rate since1964?

all of the above:

it has increased overall, it has increased for women, it has decreased for men

A recession has traditionally been defined as a period during which

real GDP declines for two consecutive quarters

Which of the following statements concerning the relative distribution of income is correct?

Taxes and transfer payments both decrease the degree of income inequality

Supply-side economics can be described in termsof the aggregate demand and aggregate supply model as an attempt to shift:

The aggregate supply curve to the right

In his statement before the National Commission on Fiscal Responsibility and Reform, Chris Edwards states that there are four types of reform that should be pursued in cutting the budget. Which of the following is NOT one of those types of reform?

reducing the national debt

In their statement before the National Commission on Fiscal Responsibility and Reform, Robert Greenstein and Jim Horney state their belief that stabilizing the ratio of debt held by the public to GDP is the right goal, and could be achieved by limiting annual deficits to ___ percent of GDP.

three

In his essay arguing that the income distribution has become more unequal, James Cypher states that to get on the bottom rung of the income ladder of the top 10 percent of households in 2000 required an adjusted gross income of ____ per year, and to get on the bottom rung of the income ladder of the top one percent of households in 2000 required an adjusted gross income of ____ per year

$104,000 and $384,000

The unemployment rate understates the true problem of unemployment because of

all of the above:

the limited hours for some part-time workers, the plight of discouraged workers, the plight of people who have given up looking for a job

When referring to GDP over time, we want to use

real GDP

Which of the following is a tool of (expansionary) supply-side policy?

decrease in government regulations

Which of the following is a tenet of supply-sideeconomics?

Decreases in social security, taxes and other business taxes shift the aggregate supply curve to the right

Which of the following is true about theunemployment rate?

The number in the numerator is also included in the denominator in the ratio

The effects of stagflation include

recession

An economy previously had 1,000 people in the labor force. Of those 1,000 people in the labor force 100 were unemployed. As the economy starts to pick up 200 previously discouraged workers decide to join the labor force. Of the 200 individuals, 150 of them are able to get a job. What is true about the unemployment rate:

It went from 10% to 12.5%

An economy previously had 1,000 people in the labor force. Of those 1,000 people in the labor force 100 were unemployed. As the economy starts to struggle 100 workers in the labor force decide to retire. Of these 100 individuals, 20 of them were unemployed at the time they decided to leave the labor force. What is true about the unemployment rate:

It went from 10% to 8.9%

Which of the following is correct? A regressive tax

takes a larger percentage of income from low income people than high-income people

What is one of the lessons that we have learned from talking about hyperinflation?

It is a symptom of a rapid increase in the money supply

Which causes greater expansion of the economy?

an increase in government spending financed by government borrowing

Statistical discrimination

involves judging prospective employees on the basis of their group rather than individually

Among the effects of discrimination are

the national output is less than it could be

Which of the following is not a reason as to whythe aggregate demand curve is downward sloping?

The substitution effect that says if a price ofone good increases we will shift our purchases to other goods that are relatiely cheaper

Census data comparing earnings by gender and race

must be interpreted cautiously because culture and individual choice may explain some of the observed differentials

When we graph the aggregate economy in classwhat does the horizontal axis most likely represent?

GDP

What effect will the elimination ofenvironmental regulations most likely have on the aggregate economy:

Increase output, increase employment, decrease price level

Which of the following do you think is most likely the goal is of supply side economics:

Decrease unemployment, decrease the price level and increase output

If you wanted to measure growth in the US economy from one year to the next what is true about calculating this growth using real GDP in lieu of nominal GDP?

Real GDP will remove inflation so we can measure how the economy actually grew

Which of the following was not a major factor during the most recent financial crisis?

High interest rates

Price supports:

increase pollution because supports encourage the cultivation of marginal land and the use of more pesticides and fertilizers

The misallocation of resources associated with price supports:

affects both domestic and foreign economies

Equilibrium price and quantity will be:

$3; 65,000

If the government supports the price of wheat at $5 (price floor), therewill be a:

surplus of 25,000 units of wheat

The twin problems of the U.S. health care industry are:

rapidly rising costs and unequal access to health care

The largest share of government payments to farmers have gone to:

large farms and agribusiness

Because there has been extensive technological change in agriculture:

over time, supply has increased more than demand

When we say that price supports interfere with the rationing function of price, we mean that:

price supports do not allow the price to fall to the equilibrium level, thereby eliminating the surplus

Target prices differ from price supports in that:

all of the above:

target prices indirectly subsidize both domestic and international buyers, no surplus is created, it is easier to calculate the cost of the policy than with price supports

Which of the following is not a major contributorto world hunger?

insufficient food production

In general, which of the following is not a liberal suggestion for agricultural policy reform?

the government should decrease or end farm programs

What do physicians’ sovereignty and third-party payment have in common?

They both increase the demand for health care

Among the problems associated with U.S. health care is that:

significant numbers of uninsured people lack access to the healthcare system

What factor below encourages an over-allocation of resources to health care?

Third-party payment

Defensive medicine:

increases the demand for health care

Which of the following have frequently been suggested as ways to slow down increases in U.S. health care costs?

Managed care plans instead of traditional fee-for-service insurance

What portion of U.S. total health spending ispaid for by private and public insurance?

four-fifths

The U.S. beer industry is a good example of:

an oligopoly

Compared to competitive markets, monopolies charge:

higher prices, produce less output, and make higher profits

When economists say that health care services are overconsumed, they mean that:

some resources now used in the health care industry could produce alternative goods and services that society values more highly

Given the availability of the Medicaid program, why are so many poor peopleuninsured?

Because many poor people earn enough that they do not qualify for Medicaid

Which of the following best describes the market of a commodity such as wheat?

the inelastic demand means that a bumper crop will most likely decrease farmers incomes

With supply restriction programs, the supply curve of agriculture continued to increase. Which of the following reasons would you give to explain this result:

Farmers did not farm on their less fertile land and over-farmed the fertile land

Price discrimination is:

charging different prices to different customers when the price differences are not based on cost differences

Economies of scale over a wide range of output:

mean that cost per unit of output is lower at high levels of output

The essence of market power is:

the firm’s ability to influence the market price of its product

When we say that the competitive firm is a price taker, we mean that:

the output of the firm is too small to influence the market price of the product

Which of the following is true about target prices with deficiency payments:

Farmers like them because they receive a higher price for their product and sell more of their product

A major difference between social insurance and public assistance programs is that:

social insurance covers the entire eligible population, but public assistance coversonly the needy

The long-run problem of Social Security is that:

the ratio of workers to recipients is declining

Atax takes $2,000 from Joe whose total income is $20,000. The tax takes $3,000 fromJames whose income is $40,000. The tax is:

regressive

What is the four firm concentration ratio for the beer industry if there are 5 firms in the industry and the percentage of output produced by the firms is 8%, 12%, 25%, 33% and 22%?

92%

When do natural monopolies exist?

When there is a large decreasing average cost curve associated with the industry

In the Taking Sides essay, “Is Obamacare a Disaster for the Economy,” the authors discuss the history of health care legislation, and mention that Medicare and Medicaid became law under who’s administration.

President Johnson

In her essay, “Top 10 Disasters of Obamacare,” Kathryn Nix does not include which one of the following in her top 10 list?

Increase Medicare costs

What is the goal of a monopoly?

To maximize profits

Which of the following are true about Social Security:

all of the above:

It’s the largest government program in the world, It is primarily funded through FICA, It was originally signed into law by FDR as part of the New Deal

If Judy makes $50,000 a year and Ron makes $200,000 and they have to pay a tax through FICA to fund Social Security. Which of the following would you say is most likely the case given how the current tax works:

A smaller percentage of Ron’s income will go toward the tax

Which of the following best explains a way in which Social Security, in general, is regressive:

On average wealthy people live longer so they can tap into these benefits for a longer period of time

Price and quantity supplied are _____ related, and price and quantity demanded are _____ related.

positively, negatively

The next question refers to the following production possibilities curve for medical care and education.If the economy is at point G, it represents:

an impossible point to reach with available resources.

The next question refers to the following production possibilities curve for medical care and education.Point E represents:

an efficient use of society’s resources.

The next question refers to the following production possibilities curve for medical care and education.If the economy is at point C, the opportunity cost of 40 additional units of medical care will be:

10 units of education forgone

When the demand curve shifts to the left, we say that:

demand has decreased.

When we say “all other things equal” with regard to demand and supply,we mean that:

factors other than price that could affect quantity demanded or supplied do not change.

A neighborhood group initiates a “neighborhood watch” program. Elladoesn’t take part in the program, but she enjoys the greater security theprogram provides. Ella is a:

free rider

The best way of evaluating crime prevention programs from an economicperspective is to look at their:

benefits and costs.

We generally assume that legalization of drugs would ________ the supplyof drugs in the market.

increase.

Suppose that people find out that eating morebeef negatively impacts their health, leading them to decrease their demand for beef. As a result, the equilibrium price of beef ____ and the equilibrium quantity______.

the amount of lemons that will be available at various prices has declined

An economic argument for the legalization of drugsis:

drugs would no longer be as profitable for organized crime.

If Maurice has a comparative advantage in theproduction of good X overKristen, then

the opportunity cost of producing X for Maurice is lower than for Kristen

The Long Island Railroad once asked the New YorkCommerce Commission for a 20% increase in its commuter rates. They argued thatdeclining revenues made this rate increase necessary. Opponents of the rateincrease contended that the railroad's revenues would fall because of the ratehike. It can be concluded that:

the railroad felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic

Assumethat the local government puts a rental ceiling of $400 on the housing marketbelow (click link for graph). What would be the effect?

a shortage of 200 apartments.

If your demand for Coca-cola is elastic and the price falls, which of the following is most likely to occur?

Your total expenditure on Coca-cola will increase

A situation whereby one country can produce a good with lower opportunity costthan another country defines:

comparative advantage.

If looking at the market for belts, if thepopulation decreases at the same time that belt producers pay higher wages totheir factory workers even though their productivity hasn’t increased, then theequilibrium price _______ and the equilibrium quantity ________. Assumeperfectly competitive markets.

is indeterminate; decreases

Producersof U.S. exported products may suffer when the United States imposes traderestrictions on imports because:

all of the above

U.S.trade restrictions on imports result in:

all of the above.

At $30 a case, consumers demand 200 cases ofbeer at the distributor. When the price increases to $40 a case,consumers demand 170 cases of beer. What is the price elasticity ofdemand (hint: use the formula given during recitation)?

.45

“ Asituation where the prices of a country’s exports decline relative to theprices of its imports” is the definition for:

declining terms of trade.

At $30 a case, consumers demand 200 cases ofbeer at the distributor. When the price increases to $40 a case,consumers demand 170 cases of beer. Demand for beer would be (hint: usethe formula given during recitation)?

Inelastic

In a two-country world consisting of the U.S. and Canada, a decrease in the value of the U.S. dollar means:

all of the above

Which of the following would most likely be astatement given by Jeannette Wicks-Lim with respect to the minimum wage?

Wage rates are sticky and the labor market does not clear as do other competitive markets

Which of the following statements most closelyrepresents the ripple effect as stated by Wicks-Lim?

An increase in the minimum wage not only helpsthose who were previously below the minimum wage but also benefits workers whoare slightly above the minimum wage

Whatdoes Joseph Stiglitz believe to be the primary reason for the lack of progressin the Doha Development Round?

The refusal of the U.S. and Europe to do anything about their agricultural subsidies hurting farmers in the developing world.

JackShilling argues that due to China’s intervention into the currency exchangemarket, the renminbi is undervalued relative the U.S. dollar by about

40 percent

Crusoe can collect 10 coconuts per day if he only collects coconuts, or 5 crabs perday if he only collects crabs. Friday can collect 5 coconuts per day if he only collects coconuts, or 5 crabs per day if he only collects crabs. What is Crusoe’s opportunity cost for collecting an additional crab and what isFriday’s opportunity cost for collecting an additional coconut, respectively?

2 coconuts ; 1 crab

When drawing a market diagram for the labormarket, it is important to keep in mind what the supply and demand curvesrepresent. With this said which of the following is correct?

The demand curve represents firms/employers

Harryproduces 2 balloon rides and 4 boat rides an hour. Harry could produce moreballoon rides but to do so he must produce fewer boat rides. Harry is ________his production possibilities frontier.

producing on

In the markets for Coca-Cola and Pepsi, assumethat the supply for Coca-Cola increases, the equilibrium price of Pepsi will______ and equilibrium quantity of Pepsi will ______, ceteris paribus(hint: use two market diagrams, one for Coca-Cola and one for Pepsi)?

decrease; decrease

If there is an effective minimum wage pricefloor in effect, then which of the following answers best explains the marketdiagram:

Quantity of labor supplied is greater thanquantity of labor demanded

Whichof the following is more likely to encourage research into new technologies andlower cost methods of meeting environmental quality?

performance standard

Two reasons that the environmental movement developed in modern, industrializedcountries are that:

pollution control is a luxury good, and the type of pollutants we have in modern timesare more toxic than pollutants used to be

Which of the following answers most likely explains why a sugar tariff would be placed on foreign countries trying toexport their sugar into the US:

The impact on US consumers is spread across many consumers and not as noticeable to each consumer, whereas the impact on US sugar producers is more concentrated

Crusoe can collect 10 coconuts per day if heonly collects coconuts, or 5 crabs per day if he only collects crabs. Friday can collect 5 coconuts per day if he only collects coconuts, or 5 crabsper day if he only collects crabs. Does Friday have an absolute advantagein collecting either good?

no

Crusoe can collect 10 coconuts per day if heonly collects coconuts, or 5 crabs per day if he only collects crabs. Friday can collect 5 coconuts per day if he only collects coconuts, or 5 crabsper day if he only collects crabs. Does Friday have a comparativeadvantage in collecting either good. And if so, in which one?